Convenience Store Food Service Consultant- Dean Dirks: News, Articles, Events

May 19, 2008

Entering or Expanding Food Service

Filed under: Speeches — Tags: , , , — deandirks @ 9:00 pm

Outline of the “Enter or Expanding Food Service” speech I gave at the Pinnacle Summit 2008 in Grapevine, Texas.

By Dean Dirks

  1. THE RISK
    Soft U.S. economy.
    Diminishing customer counts.
    High food costs.
    Escalating labor costs.
    High energy costs
    Closure rates: Quizno’s 7.5%– Blimpie 16.1%– Krispie Kreme 10.7%.
  2. THE REWARD
    Profits can be $5k-$10k a month .
    It the concept is a good fit, it will create a destination location.
    One stop shop is attractive to consumers.
    Food service builds frequency.
    Inside sales will lift because of ancillary purchases.
  3. GUT CHECKS
    The companies’ ability to operate food service.
    Willingness to pay market rates for food service managers.
    Staffing stores- a big problem, do you want to add to the problem?
    The owner’s patience to loose money in the beginning.
  4. GUT CHECKS
    Where do your core competencies lie?
    Unbranded (creativity)
    Saves commissions
    No support network.
    Longer to develop
    Branded (systems in place).
    Lack of control with inspections, audits, etc.
  5. SITE REVIEW
    Locations often fail due to poor site reviews.
    Traditional restaurants spend $10,000 to $20,000 on site reviews.
    Visibility, data shows that the “if you build it they will come” theory is not always true.
    Poor signage destroys food service
  6. SITE REVIEW
    Adequate parking, making money at food service can’t be a trade off for hurting inside sales
    Parking at the pumps due to poor parking
    Walk-up business, office and factory workers can offset parking
    Drive thrus are critical for some concepts.
  7. SITE REVIEW
    Logistic issues, flow of customers
    Demographic match
    Day part customer counts in the store, deli stronger from 11-2,  pizza stronger 5-8, chicken 5-8.
  8. THREATS
    If the concept is a branded, realize that QSR companies can build as close to as they choose.
    Bridging strategy.
    Future developments that may change traffic flows, new malls, and possible future QSR plans.
    Available real-estate for traditional QSR restaurants to build.
  9. SALES FORECASTING
    Customer counts, capture rate data and average check used to forecast sales.
    If branded companies use sales numbers complete your own due diligence.
    High sales “hide  sins”, low sales make it hard to manage COGS and labor.
  10. CALCULATING COST OF GOODS
    Don’t use % information given to you.
    Develop recipe for each item, include everything, condiments, napkins, straws.
    Cost each recipe.
    Set the retail price of each item.
    Calculate estimated sales mix.
    Calculate ideal cost of goods, + 3%.
  11. LABOR FORECAST
    Don’t use % when forecasting labor.
    Write a schedule to staff the location.
    Labor rates differ state to state-a percent won’t work.
    Use loaded labor (payroll taxes).
    Calculate total fixed labor.
  12. LABOR FORECAST EXAMPLE
    Two people needed to staff a deli.
    They can produce 4k a wk in sales or 6k a wk in sales.
    The fixed scheduled dollars are $1,200.
    4k a week in sales = 30% labor costs.
    6k a week in sales= 20% labor costs.
  13. FINANCIAL ANALYSIS
    Develop a profit and loss forecast based on previous information.
    Enter all expenses, labor at all levels (senior management), utilities, water, credit card fees, etc.
    Consider the opportunity cost of the space. Analyze the cost of a beer cave and a lift in beer sales for example.
  14. THE END OF THE DAY
    Calculate internal rate of return.
    Determine whether the internal rate of return meets the owners hurdle rate.
    If the internal rate of return doesn’t meet the owner’s threshold for risk it may  be better to pass.
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